One good thing about the budget: the recognition by George Osborne that the financial crisis began with the banks. This was the justification for the £2 billion bank levy – though, as nef’s Tony Greenham points out, this is only a third of what they paid out in bonuses.
The implication – though Osborne didn’t say this bit – is that it will also end with the banks. Only the most anal deficit hawk can possibly believe any more than we can cut our way to recovery. Quite the reverse. John Maynard Keynes warned that this approach will lead to “a peregrination in the catacombs with a guttering candle”.
No, the only way out of recession is to get the enterprise economy working again, despite decades when official attention – and certainly the attention of the banks – has been elsewhere. The fantasy is that somehow the free market will do this magically, when it clearly won’t – and the main reason it doesn’t is that we no longer have a banking system fit for purpose. Its structure and attention is on the speculative economy.
So, although Osborne may have made the link between the banks and the crisis, the full implications of that don’t seem to have been worked through in the budget. There is nothing but more cuts ahead unless we can produce a useful, local banking infrastructure out of the oligopoly of dinosaurs we have inherited from the huge banking mergers that the UK government encouraged throughout the 20th century.
We have names now to the banking commission that will investigate this, but they are not hugely inspiring ones, and the hands of the expensive lobbyists for the banking industry are everywhere – and desperate to keep us all chained supplicants to the old dispensation.
The key point we need to get across is that solving the problem of our ineffective banking infrastructure is critical to bringing recovery forward, and staving off more cuts. It is a fantasy to suggest that somehow UK bankers can be cajoled in lending more effectively locally. They don’t have the systems or the people in place to do that. It is a fantasy to imagine that enterprise will somehow emerge without lending.